Wide Spectrum of Developments Elicit Financial Market Response

July 25, 2017

In an escalated barrage of complaints, President Trump has lashed out at a range of adversaries: Attorney General Sessions, Congressional Republicans, Hillary Clinton, Bob Meuller, and the press.

A vote on repealing the Affordable Care Act seems likely in the Senate this afternoon.

The Federal Open Market Committee began a two-day policy meeting today.

U.S. 2Q corporate earnings have for the most part been favorable for the most part, but Google disappointed.

The IFO index of German business climate rose to a new record high in July for a third straight month.

Minutes from the Bank of Japan’s mid-June Board meeting reveal disagreement over whether policymakers should at this stage communicate how their policy of quantitative stimulus will be ended eventually.

Saudi Arabia has pledged to cut oil exports further.

Several U.S. economic indicators were reported today covering housing prices, weekly chain store sales, consumer confidence and manufacturing in the Richmond Fed District.

With so much to digest, markets have reacted as follows:

  • The dollar has risen 0.3% against the yen but fallen 0.4% against the Aussie dollar, 0.3% relative to the euro and 0.2% vis-a-vis sterling.
  • Asian stocks declined 0.5% in South Korea, 0.4% in Hong Kong, 0.2% in China and 0.1% in Japan.
  • Stocks in Australia and New Zealand rose 0.7%.
  • Equities in Europe climbed 1.0% in Spain, 0.9% in the U.K. and France, 0.6% in Italy and 0.5% in Germany and Switzerland. The U.S. Dow rose somewhat in early trading.
  • Ten-year sovereign debt yields are up by six basis point in Germany and by 5 basis points in the United States and Great Britain.

West Texas Intermediate crude oil advanced by a further 2.1% to $47.31 per barrel. Copper also gained more than 2.0%. But gold is only steady.

The Case Shiller house price index in 20 U.S. metropolitan areas posted a 5.7% on-year advance in May.

The FHFA’s U.S. house price index advanced 0.4% on month in May, a 4-month low, but 6.9% on year, the most so far this year.

The Conference Board’s U.S. consumer confidence index jumped 3.8 points to a 4-month high of 121.1 in July. Six months earlier, the index stood at 111.8 in January.

The Richmond Fed manufacturing index improved three points to a reading of 14 in July, best since March.

The German business climate index rose 0.8 points to a “euphoric” 116.0 in July. Current conditions haven’t been this good since 1990. Expectations improved to their best level of the year. Manufacturing and construction set new record highs. Retail fell to a 4-month low, however.

The CBI British industrial trends index settled back to a score of 10 in July from 16 in June but recorded the best 3-month performance in over 20 years.

In price news,

  • German import prices fell more sharply in June than forecast, dropping by 1.1% on month and to the smallest 12-month rate of increase (2.5%) since last November. Energy fell 5.8% on month, while all other import prices declined 0.6%. Export prices dipped 0.2% on month and eased to a 1.8% on-year increase, which is a 6-month low.
  • French producer price inflation decelerated to 1.8% in June from 2.6% in May.
  • Spanish PPI inflation slowed to 3.2% in June from 5.3% the month before.
  • Swedish PPI inflation dropped to 4.8% from 7.2%.

The French statistical agency, INSEE, reported for July a one-point rise in overall business sentiment to 109, unchanged manufacturing sentiment of 109, and strengthening sentiment in services, construction and retail.

Belgium’s business climate improved 0.5 to a reading of minus 1.5 in July.

Polish unemployment in June of 7.1% was 1.6 percentage points less than a year earlier.

Italian industrial orders jumped 4.3% on month in May to 13.7% higher than a year earlier.

Consumer sentiment in June rose slightly in South Korea but slipped a bit in Brazil.

South Africa’s index of leading economic indicators was unchanged in May.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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